NEW DELHI: In the Sikandra Road property case, the Supreme Court recently dismissed pleas filed by the two sons of former Chief Justice of India (CJI) YK Sabharwal against notices issued by the Income Tax Department.
A Bench of Justices JB Pardiwala and K Vinod Chandran cleared the decks for the Income Tax Department to proceed with reassessment proceedings against Chetan and Nitin Sabharwal, the former CJI's businessman sons, over share transactions linked to the purchase of a prime property on Delhi's Sikandra Road in 2010.
It may be noted that the purchase of the Sikandra Road property by the Sabharwal brothers came under the Income Tax Department's scrutiny during the controversy surrounding the sealing drive in the national capital.
The top court dismissed four appeals filed by Chetan and Nitin Sabharwal, upholding the income tax reassessment notices issued for the assessment years 2008-09 and 2009-10.
Justice Sabharwal served as the 36th CJI from November 1, 2005, to January 14, 2007. He had a long judicial career spanning the Delhi High Court, Bombay High Court and, subsequently, the Supreme Court. He died in 2015 at the age of 73.
According to the Income Tax Department, the two brothers purchased the property on Sikandra Road in 2010, with the funds for the acquisition allegedly coming from bogus share transactions.
The department alleged that the share transactions were accommodation entries routed through paper companies and were not genuine. It subsequently issued notices to the brothers under Section 148 of the Income Tax Act, alleging escapement of income.
The Sabharwal brothers challenged the notices before the Delhi High Court, contending that there was no fresh material to justify the reassessment and that reopening the cases on the basis of a mere change of opinion was impermissible.
The Delhi High Court rejected their challenge, following which the brothers approached the Supreme Court seeking relief.
While upholding the Income Tax Department's notices, the Supreme Court observed that the reassessment notices were valid and based on tangible material indicating escapement of income. It added that, at the stage of issuing a notice under Section 148, the court only had to examine whether a prima facie reason to believe that income had escaped assessment existed, and not examine the merits of the proposed additions.
By dismissing the appeals, the top court paved the way for the Income Tax Department to complete the reassessment proceedings. It clarified that the genuineness of the share transactions would have to be examined during the reassessment process.